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Rapaport TradeWire July 11, 2014
Jul 10, 2014 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
July 11, 2014
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Polished prices coming under increased pressure as some Indian cutters reduce 1ct. and larger prices due to weak demand, oversupply and cash flow requirements. Mumbai IIJS show will provide important indication of price movements. Rapaport Melee Index +1% in 2Q. India proposes to raise polished import duty to 2.5%, extends diamond import credit cycle from 90 to 180 days. Dominion buys Fipke Holdings 10% stake in Ekati for $67M. De Beers sells 26% of S. Africa sales unit to BEE partner. Chow Tai Fook 1Q revenue -32% as Chinese gold rush slows, gem-set jewelry sales +2%. U.S. May polished imports -3% to $3.1B, polished exports +33% to $2B. Israel’s 1H polished exports +6% to $3.6B.
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RapNet Data: July 10
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| Diamonds |
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1,126,032 |
| Value |
$7,194,160,004 |
| Carats |
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1,252,284 |
| Average Discount |
-26.82% |
www.rapnet.com
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
Consistent with so many of our fellow U.S. retailers, we are experiencing a retail funk. We are confident that customer enthusiasm for our brand and employee morale are at all-time highs, yet we continue to experience slight traffic declines in this surprisingly tepid retail environment. While consumers are buying homes and automobiles and even high ticket furniture, most segments of retail are, like us, seeing more challenging sales than we had hoped early in 2014 – so we’re not alone in this.
Kip Tindell | Container Store
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Careers@Rapaport
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The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.
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INDUSTRY
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Rap Melee Index +3%
The Rapaport Melee Index (RMI™) for small diamonds increased by 1% to 138.78 during the second quarter of 2014, while year on year the index is up 3.4%. Polished trading slowed during the second quarter following a strong start in the first quarter at which time retail jewelers replenished inventory after the Christmas and Chinese New Year seasons. Diamond buying subsequently focused on filling specific orders during the second quarter; however, despite the slowdown, market sentiment remained relatively positive in June.
The third quarter is projected to be a difficult period for the diamond trade, as it has been in the past few years. At best, polished prices are expected to remain stable, which will put additional pressure on manufacturers’ profit margins and should influence a decline in rough demand.
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India's Polished Import Duty May Rise
India's Finance Minister Arun Jaitley proposed a 2.5% customs duty on semi-processed, half-cut or broken diamonds, cut and polished diamonds and colored gemstones to prevent misuse and avoidance of assessment disputes. During his speech to Parliament, he also proposed that pre-forms of precious and semi-precious stones would be fully exempted from basic customs duty in an effort to encourage exports.
In other news, the Reserve Bank of India (RBI) stated that the "Clean Credit" or credit given by a foreign supplier to India-based buyers, without any letter of credit (suppliers) or letter of undertaking (buyers) or fixed deposits from any Indian financial institution for importing rough, cut and polished diamonds, may be permitted for a period not exceeding 180 days from the date of shipment. The previous requirement permitted a period not exceeding 90 days from the date of shipment. RBI issued the new guideline following consultation with the Gems & Jewellery Export Promotion Council (GJEPC) and the Surat Diamond Association.
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RETAIL & WHOLESALE
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Chow Tai Fook Sales Drop
Chow Tai Fook Jewellery Group Ltd. released unaudited operational data for the first fiscal quarter that ended on June 30 and estimated that group sales plunged 32% year on year. Same-store sales fell 40% group wide with a 28% decline for Mainland China and a 50% contraction for the Hong Kong, Macau and other Asian markets.
Retail sales fell during the quarter due to what the company defined as an "extraordinary high base effect" one year earlier that resulted from much higher gold product sales as gold prices declined in 2013. Nonetheless, gem-set jewelry sales performed well during the period by increasing 2%. Chow Tai Fook opened 46 points of sale in Mainland China during the first quarter; four were opened in Hong Kong, Macau and other Asian markets, increasing the retailer's total number to 2,123 as of June 30.
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Michael Hill's FY Sales +10%
Michael Hill International estimated that its global sales rose 9.7% year on year to $454 million (AUD 483 million), while same-store revenue rose 5% to $408 million for the fiscal year that ended on June 30. Sales performance varied widely by region and in local currencies with Canada's sales growth up 30.3% to $65 million (CAD 69 million), while U.S. store sales declined 2.8% to $10 million. Jewelry store sales in New Zealand fell 1.5% to $97 million (NZD 110 million), but in Australia, the company's largest market, revenue increased 4.4% to $284 million.
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Amazon Lands in Top 10
Online retailer Amazon.com broke into the Top 10 of STORES Media's annual list of the Top 100 U.S. retailers, which was published in the July issue of STORES Magazine. The top retailer, of course, was Walmart with annual sales of $334.3 billion in 2013. Fred Meyer Jewelers' parent company, Kroger, came in second place with revenue of $93.6 billion and Costco was third with $74.7 billion. Target was in fourth place with sales of $71.3 billion, followed by non-jewelry retailers, The Home Depot, Walgreen, CVS and Lowe's. Amazon.com's revenue jumped 27.2% in 2013 to almost $44 billion, pushing it to ninth place as grocer Safeway closed out the list at No. 10.
Breaking into the top 10 this day in age is an impressive feat that speaks to Amazon.com’s growth, according to the magazine. Kantar Group, which conducted the survey results, concluded that Amazon’s rise into the top 10 is symbolic of a shift in U.S. retail toward a genuinely multichannel future. Top 100 retailers of the future will have an in-depth knowledge of their shoppers across their physical and digital touchpoints, and they'll all have to fend off Amazon’s game changing economic and operating model.
Those retailers in the Top 100 list that sell jewelry included, Macy's (No. 14), Sears (No. 16), Kohl's (No. 22), BJ's Wholesale (No. 29), Nordstrom (No. 33), JCPenney (No. 34), Bed Bath & Beyond (No. 36), Dillard's (No. 67), QVC (No. 73), Neiman Marcus (No. 86), Belk (No. 93) and Signet Jewelers (No. 99).
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BJ's Pledges No Dirty Gold
BJ's Wholesale Club endorsed Earthwork's No Dirty Gold campaign in an effort to source metals used for its jewelry and electronic offerings through socially and environmentally responsible methods. BJ's has 202 locations in 15 Eastern U.S states and is the first independent wholesale club company to commit to and endorse the campaign's Golden Rules. The company stated that it actively seeks ways to provide high-quality products that reduce the impact on the environment.
Tiffany & Co., Signet, Target Corp. and Helzberg Diamonds, among others have made the pledge. Earthworks stated that it hopes other jewelers and Costco and Macy's will follow suit.
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Sotheby's to Sell 'Henry Graves Supercomplication'
Sotheby’s Geneva will present The Henry Graves Supercomplication timepiece for auction on November 14, which the auction house estimated could sell for more than $16.8 million (CHF 15 million). The watch was made by Patek Philippe in 1933 and is described as a most complicated watch to be made completely by hand. Sotheby’s first sold the Henry Graves Supercomplication in New York in December 1999 for $11 million, well above the presale estimate of between $3 million and $5 million. Now, the watch returns to auction the same year Patek Philippe celebrates the brand's 175th anniversary.
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Tanishq Debuts Inara
Diamond jewelry brand Tanishq introduced Inara, an extension of a new line of diamond jewelry that it introduced in 2013. Inara was inspired from marine sea life with textured surfaces, fluid fineness and interwoven designs. Inara was unveiled in New Delhi this past week. The new line is crafted in white and yellow gold with white rhodium plating, which enhances the diamond look, according to Tanishq. The collection also incorporates colored gemstones such as ruby, emeralds, and blue, pink and yellow sapphires. The Inara line includes necklaces, bangles, earrings and finger rings.
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GENERAL
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Mass Media Misidentifies Antwerp Suspect
The Antwerp Prosecutor’s office confirmed that Rosy Blue's CEO, Dilip Mehta, was wrongfully identified in press reports as the "Dilip M." who had been arrested on their behalf in Dubai on June 18. Additionally, the Antwerp Prosecutor’s office never confirmed or posited that Mehta is involved in the ongoing diamond fraud case for which a suspect is now in custody. The officials called the case of mistaken identity "very regrettable." Rosy Blue demanded news agencies retract the "appalling" error from their reports and print retractions.
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Singapore Gem Fair Opens in October
The Singapore Jewellery & Gem Fair, organized by UBM Media (Singapore), will take place for a second year from October 23 to 26, at the Sands Expo and Convention Centre. UBM stated that 283 exhibitors and 8,739 visitors attended the inaugural fair in 2013 and this year they expect to host 300 exhibitors from 30 countries and regions. UBM chose Singapore for this event given the large number of high-net-worth individuals (HNWIs) and a strong market for jewelry.
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Antwerp Plans Fair for February
Organizers of the annual Antwerp Diamond Trade Fair (ADTF), an invitation-only loose diamond trade show, have scheduled to open for three days beginning February 1. The dates were coordinated with other industry events in the region, according to ADTF. Roughly 90 of Antwerp's leading diamond firms will be on hand to display a large selection of polished goods. The fair is a joint initiative between the Antwerp Diamond Bourse, the Diamond Club of Antwerp and the Antwerp Diamond Kring exchanges and is held on the bourses' diamond trading floors, which are converted into three exhibition spaces specifically for the event.
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IsDMA Elects Koren
The Israel Diamond Manufacturers Association (IsDMA) elected Kobi Koren as its new president, succeeding Avraham (Bumi) Traub.
Koren also serves as chairman of the taxation committee and the consumer committee at the Israel Diamond Exchange (IDE) and is the acting president of IDE when its current president, Shmuel Schnitzer, is absent.
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Schaffran Joins Worthy
Online marketplace Worthy.com named Ezzie Schaffran as its first vice president of operations to oversee the company's infrastructure and auction process from the New York office. Previously, Schaffran was the chief operating officer for Ice.com, where his career spanned 13 years beginning with an entry-level position and eventually working up into senior level roles. Worthy.com is an online platform that enables consumers to sell luxury goods, including diamonds, brand-named watches, jewelry, gemstones and precious metals by connecting them with pre-qualified buyers.
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De Beers Rolls Out Melee Screening
De Beers International Institute of Diamond Grading & Research began distributing Automated Melee Screening (AMS) instruments to sightholders, with the first installation and training sessions having successfully taken place with Tasaki and Rosy Blue in Japan. Focus has now shifted to installing the AMS in sightholder facilities across key diamond trading hubs such as Antwerp, Mumbai, Hong Kong and Tel Aviv.
This is a phased roll out as technicians work in parallel to ensure timely yet comprehensive installation and training. The AMS instrument can be located in any type of environmentally controlled facility and operates as a single machine or multiple units; it screens near-colorless and colorless round brilliant diamonds from 0.20-carats down to 0.01 carat; is fully automated and will take up to 500 carats at any one time with a throughput of 360 stones per hour.
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MINING
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Dominion Increases Share in Ekati
Dominion Diamond Corporation entered into an agreement with C. Fipke Holdings Ltd. to acquire its stake in the Ekati diamond mine for $67 million, subject to adjustments to reflect joint venture contributions and distributions since June 30, 2012 when BHP Billiton sold the project.
The Ekati mine consists of the core zone, which includes the current operating mine and other permitted kimberlite pipes, as well as the buffer zone, an adjacent area hosting kimberlite pipes with both development and exploration potential.
Dominion Diamond initially held an 80% interest in the core zone, with Fipke and Dr. Stewart Blusson each holding a 10%. Dominion Diamond carries a 58.8% interest in the buffer zone, with Fipke holding a 10% share and Archon Minerals Limited holding a 31.2% interest.
The agreement stated that Fipke will sell its share in the core zone for $50 million and its interest in the buffer zone for $17 million.
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Lucapa Recovers Six Type IIa Stones
Lucapa Diamond Company recovered six type IIa stones along with six other gem-quality diamonds from preliminary surface sampling at its Lulo diamond concession in Angola.
The company noted that the diamonds were recovered from four separate kimberlite pipes. Five of the type IIa diamonds recovered weighed a total of 2.30 carats and ranged in size from 1.05 carats to 0.15 carats.
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De Beers Completes Empowerment Mandate
De Beers completed its black empowerment mandate under the South African Mining Charter for both its diamond mining and its diamond trading businesses. Black empowerment partner Ponahalo Holdings, which has held a 26% stake in the mining operations of De Beers Consolidated Mines since 2006, now also holds a 26% stake in De Beers sightholder sales division of South Africa, located in Kimberley, Northern Cape Province.
All of De Beers South Africa diamond production, roughly 5 million carats per year, is sorted and valued in Kimberley, where the company holds 10 diamond sales a year supplying South Africa’s leading diamond cutting factories.
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Stornoway Finances Renard
Stornoway Diamond Corporation closed its financing transactions with Orion Mine Finance, Diaquem Inc. and Ressources Quebec, which are wholly-owned subsidiaries of Investissement Quebec, and the Caisse de depot et placement du Quebec for all funds related to completing the Renard diamond project.
The financing package totals $886 million (CAD 946 million) through a combination of senior and subordinated debt facilities, equity issuances, an equipment financing facility with Caterpillar Financial and the forward sale of diamonds.
Concurrent with the closing, approximately $435 million (CAD 464 million) in aggregate gross proceeds from the public and private offerings of subscription receipts and the private offering of convertible debentures has been released, which will allow Stornoway to immediately begin construction on the Renard project.
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Diamcor Completes Upgrades
Diamcor Mining Inc. completed the construction, installation and commissioning work that was associated with expanding an in-field dry-screening plant at the Krone-Endora at Venetia diamond project in South Africa. Plant upgrades included the installation of a second Dabmar Bivitec screening unit as well as the design, construction and installation of significant additional conveyor belt and material handling structures to create a closed-loop automated system.
Diamcor Mining has contended for some time that the plant's expansion would enhance the efficient screening of fine material, reduce operating costs and effectively support increased processing capacity over the long term.
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North Arrow Completes Till Sampling
North Arrow Minerals Inc. completed its planned till sampling at the Pikoo diamond project in central-eastern Saskatchewan, Canada. North Arrow collected 441 till samples in June, which was a follow up program to the discovery of diamond bearing kimberlite in 2013.
The recent samples were sent to a processing laboratory for examination for which results will be used to evaluate selected potential kimberlite targets and provide more detailed regional coverage of the eastern portion of the property in defining individual kimberlite indicator mineral trains. Follow up exploration, including drilling, is tentatively planned for the fall 2014 and during the winter and spring of 2015.
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STATS
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U.S.
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May $Mil. |
%Chng. |
YTD $Mil. |
%Chng. |
| Polished imports |
$3,105 |
-3% |
$10,593 |
6% |
| Polished exports |
$1,970 |
33% |
$8,549 |
13% |
| Net imports |
$1,135 |
-34% |
$2,044 |
-17% |
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| Rough imports |
$61 |
15% |
$330 |
71% |
| Rough exports |
$47 |
213% |
$235 |
114% |
| Net imports |
$14 |
-57% |
$94 |
16% |
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| Net diamond account |
$1,149 |
-34% |
$2,138 |
-16% |
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Israel
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1H $Mil. |
%Chng. |
| Polished exports |
$3,552 |
6% |
| Polished imports |
$2,155 |
3% |
| Net exports |
$1,399 |
11% |
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| Rough imports |
$2,053 |
1% |
| Rough exports |
$1,752 |
6% |
| Net imports |
$302 |
-22% |
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| Net diamond account |
$1,097 |
25% |
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ECONWATCH
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Diamond Industry Stock Report
Summer trading doldrums have set in with retail stocks as industry shares were largely unchanged with the biggest movers being Chow Tai Fook, Richemont and Swatch, which were all down 3%. Indian shares were all lower except for Goldiam (+5%) and Goenka (+3%). Mining shares mainly higher, led by Gem Diamonds (+20%). View the extended stock report.
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July 10 |
June 26 |
Chng. |
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| $1 = Euro |
0.734 |
0.734 |
0.000 |
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| $1 = Rupee |
60.07 |
60.18 |
-0.1 |
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| $1 = Israel Shekel |
3.43 |
3.42 |
0.01 |
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| $1 = Rand |
10.69 |
10.64 |
0.05 |
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| $1 = Canadian Dollar |
1.06 |
1.07 |
-0.01 |
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| Precious Metals |
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| Gold |
$1,335.70 |
$1,316.50 |
$19.20 |
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| Platinum |
$1,510.00 |
$1,463.00 |
$47.00 |
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| Stock Indexes |
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Chng. |
| BSE |
25,372.75 |
25,062.67 |
310.08 |
1.2% |
| Dow Jones |
16,915.77 |
16,846.13 |
69.64 |
0.4% |
| FTSE |
6,672.37 |
6,735.12 |
-62.75 |
-0.9% |
| Hang Seng |
23,238.99 |
23,197.83 |
41.16 |
0.2% |
| S&P 500 |
1,964.70 |
1,957.22 |
7.48 |
0.4% |
| Yahoo! Jewelry |
992.65 |
1,004.09 |
-11.44 |
-1.1% |
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INDIA MARKET REPORT
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Polished and Rough Trading Activity
Polished trading is slow and demand is weak, while rough prices remain stable but shortages persist. Read the full report.
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